So President Obama and Prime Minister Netanyahu are not friends this week – at least not on the diplomatic front.

Turn to economics, and Obama’s ears are carefully tuned to what is coming out of Israel. It is an accepted fact that Israel’s financial planners read the credit crunch correctly. Stanley Fisher, governor of the Bank of Israel, has long been a mentor of Ben Bernanke, his American counterpart.

It turns out that one of Bernanke’s predecessors, Paul Volcker, is also a big fan of Fisher. This is all the more intriguing, when you consider that Volcker is one of Obama’s main fiscal advisors.

Sever Plocker, a leading Israeli financial commentator, recently attended a function for an Israeli bank, when Volcker was present. To translate and quote Volcker’s reply to a question:

During the crisis, you (Israel) did all the right things. And now you are reaping the rewards. But before the crisis, a long time beforehand, you realised that you needed to invest in r&d, in education and in knowledge……..You have a wonderful central banker….and I admire the budgetary capability and management of your Finance Ministry…..Don’t squander your successes.

Volcker is known to be very impressed by the way Israel had imposed controls and supervision on its banks, after previous local failings. Apparently this is one of Obama’s next important policy moves, and he has been advised by …..Paul Volcker.